10-Q

10-Q 1 d739430d10q.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 814-00861

Fidus Investment Corporation

(Exact Name of Registrant as Specified in its Charter)


Maryland		27-5017321
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1603 Orrington Avenue, Suite 1005 Evanston, Illinois		60201
(Address of Principal Executive Offices)		(Zip Code)

(847) 859-3940

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Common Stock, par value $0.001 per share		The NASDAQ Global Select Market (trading symbol: FDUS)
5.875% Notes due 2023		The NASDAQ Global Select Market (trading symbol: FDUSL)
6.000% Notes due 2024		The NASDAQ Global Select Market (trading symbol: FDUSZ)

As of April 30, 2019, the Registrant had outstanding 24,463,119 shares of common stock, $0.001 par value.

FIDUS INVESTMENT CORPORATION

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q


	PART I — FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3
	Consolidated Statements of Assets and Liabilities — March 31, 2019 (unaudited) and December 31, 2018	3
	Consolidated Statements of Operations — Three Months Ended March 31, 2019 (unaudited) and 2018 (unaudited)	4
	Consolidated Statements of Changes in Net Assets — Three Months Ended March 31, 2019 (unaudited) and 2018 (unaudited)	5
	Consolidated Statements of Cash Flows — Three Months Ended March 31, 2019 (unaudited) and 2018 (unaudited)	6
	Consolidated Schedules of Investments — March 31, 2019 (unaudited) and December 31, 2018	7
	Notes to Consolidated Financial Statements (unaudited)	19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	55
	PART II — OTHER INFORMATION	56
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	58
Signatures		59
Exhibit Index		60

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements.

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Assets and Liabilities

(in thousands, except shares and per share data)


	March 31, 2019 (unaudited)			December 31, 2018
ASSETS
Investments, at fair value
Control investments (cost: $7,338 and $22,697, respectively)	$	5,098		$	18,820
Affiliate investments (cost: $66,636 and $70,924, respectively)		121,522			123,051
Non-control/non-affiliate investments (cost: $548,730 and $505,129, respectively)		543,861			501,111

Total investments, at fair value (cost: $622,704 and $598,750, respectively)		670,481			642,982
Cash and cash equivalents		26,209			42,015
Interest receivable		7,308			7,528
Prepaid expenses and other assets		851			1,351

Total assets	$	704,849		$	693,876

LIABILITIES

SBA debentures, net of deferred financing costs (Note 6)	$	167,332		$	186,734
Public Notes, net of deferred financing costs (Note 6)		115,087			48,411
Borrowings under Credit Facility, net of deferred financing costs (Note 6)		(84	)		36,358
Accrued interest and fees payable		1,717			2,812
Base management fee payable – due to affiliate		2,871			2,927
Income incentive fee payable – due to affiliate		2,485			2,785
Capital gains incentive fee payable – due to affiliate		9,770			9,415
Administration fee payable and other – due to affiliate		375			474
Taxes payable		215			803
Accounts payable and other liabilities		265			172

Total liabilities		300,033			290,891

Commitments and contingencies (Note 7)

NET ASSETS
Common stock, $0.001 par value (100,000,000 shares authorized, 24,463,119 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively)		24			24
Additional paid-in capital		366,278			366,278
Total distributable earnings		38,514			36,683

Total net assets		404,816			402,985

Total liabilities and net assets	$	704,849		$	693,876

Net asset value per common share	$	16.55		$	16.47

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Operations (unaudited)

(in thousands, except shares and per share data)


	Three Months Ended March 31,
	2019			2018
Investment Income:
Interest income
Control investments	$	282		$	57
Affiliate investments		1,520			1,655
Non-control/non-affiliate investments		13,450			13,023

Total interest income		15,252			14,735
Payment-in-kind interest income
Control investments		1,237			153
Affiliate investments		83			400
Non-control/non-affiliate investments		1,310			1,126

Total payment-in-kind interest income		2,630			1,679
Dividend income
Control investments		—			—
Affiliate investments		368			444
Non-control/non-affiliate investments		(73	)		(106	)

Total dividend income		295			338
Fee income
Control investments		349			—
Affiliate investments		22			(4	)
Non-control/non-affiliate investments		1,728			1,441

Total fee income		2,099			1,437
Interest on idle funds and other income		54			44

Total investment income		20,330			18,233

Expenses:
Interest and financing expenses		3,724			2,932
Base management fee		2,871			2,685
Incentive fee - income		2,485			2,224
Incentive fee - capital gains		355			1,530
Administrative service expenses		399			399
Professional fees		590			510
Other general and administrative expenses		305			295

Total expenses		10,729			10,575

Net investment income before income taxes		9,601			7,658
Income tax provision (benefit)		2			131

Net investment income		9,599			7,527

Net realized and unrealized gains (losses) on investments:
Net realized gains (losses):
Control investments		(1,268	)		—
Affiliate investments		35			6,973
Non-control/non-affiliate investments		(358	)		305

Total net realized gain (loss) on investments		(1,591	)		7,278

Income tax (provision) benefit from realized gains on investments		8			(1,747	)
Net change in unrealized appreciation (depreciation):
Control investments		1,637			73
Affiliate investments		2,759			6,385
Non-control/non-affiliate investments		(851	)		(4,341	)

Total net change in unrealized appreciation (depreciation) on investments		3,545			2,117

Net gain on investments		1,962			7,648
Realized losses on extinguishment of debt		(189	)		(150	)

Net increase in net assets resulting from operations	$	11,372		$	15,025

Per common share data:
Net investment income per share-basic and diluted	$	0.39		$	0.31

Net increase in net assets resulting from operations per share — basic and diluted	$	0.46		$	0.61

Dividends declared per share	$	0.39		$	0.39

Weighted average number of shares outstanding — basic and diluted		24,463,119			24,498,041

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Changes in Net Assets (unaudited)

(in thousands, except shares)


	Common Stock					Additional			Total
	Number of			Par		paid-in			distributable			Total net
	shares			value		capital			earnings			assets
Balances at December 31, 2017		24,507,940		$	24	$	370,796		$	22,453		$	393,273
Repurchases of common stock under Stock Repurchase Program (Note 8)		(44,821	)		—		(582	)		—			(582	)
Net investment income		—			—		—			7,527			7,527
Net realized gain (loss) on investments, net of taxes		—			—		—			5,531			5,531
Net unrealized appreciation (depreciation) on investments		—			—		—			2,117			2,117
Realized losses on extinguishment of debt		—			—		—			(150	)		(150	)
Dividends declared		—			—		—			(9,558	)		(9,558	)

Balances at March 31, 2018		24,463,119		$	24	$	370,214		$	27,920		$	398,158

Balances at December 31, 2018		24,463,119		$	24	$	366,278		$	36,683		$	402,985
Net investment income		—			—		—			9,599			9,599
Net realized gain (loss) on investments, net of taxes		—			—		—			(1,583	)		(1,583	)
Net unrealized appreciation (depreciation) on investments		—			—		—			3,545			3,545
Realized losses on extinguishment of debt		—			—		—			(189	)		(189	)
Dividends declared		—			—		—			(9,541	)		(9,541	)

Balances at March 31, 2019		24,463,119		$	24	$	366,278		$	38,514		$	404,816

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Cash Flows (unaudited)

(in thousands)


	Three Months Ended March 31,
	2019			2018
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations	$	11,372		$	15,025
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used for) operating activities:
Net change in unrealized (appreciation) depreciation on investments		(3,545	)		(2,117	)
Net realized (gain) loss on investments		1,591			(7,278	)
Interest and dividend income paid-in-kind		(2,630	)		(1,724	)
Accretion of original issue discount		(13	)		(57	)
Accretion of loan origination fees		(367	)		(214	)
Purchase of investments		(80,473	)		(60,913	)
Proceeds from sales and repayments of investments		57,352			36,093
Proceeds from loan origination fees		586			323
Realized losses on extinguishment of debt		189			150
Amortization of deferred financing costs		415			317
Changes in operating assets and liabilities:
Interest receivable		220			1,256
Prepaid expenses and other assets		482			(293	)
Accrued interest and fees payable		(1,095	)		(1,662	)
Base management fee payable – due to affiliate		(56	)		99
Income incentive fee payable – due to affiliate		(300	)		70
Capital gains incentive fee payable – due to affiliate		355			1,530
Administration fee payable and other – due to affiliate		(99	)		(137	)
Taxes payable		(588	)		1,635
Accounts payable and other liabilities		93			122

Net cash provided by (used for) operating activities		(16,511	)		(17,775	)

Cash Flows from Financing Activities:
Proceeds received from SBA debentures		—			27,000
Repayments of SBA debentures		(19,750	)		(43,800	)
Proceeds received from issuance of Public Notes		69,000			50,000
Proceeds received from (repayments of) borrowings under Credit Facility, net		(36,500	)		(11,500	)
Payment of deferred financing costs		(2,504	)		(2,560	)
Dividends paid to stockholders, including expenses		(9,541	)		(9,558	)
Repurchases of common stock under Stock Repurchase Program		—			(582	)

Net cash provided by (used for) financing activities		705			9,000

Net increase (decrease) in cash and cash equivalents		(15,806	)		(8,775	)
Cash and cash equivalents:
Beginning of period		42,015			41,572

End of period	$	26,209		$	32,797

Supplemental disclosure of cash flow information:
Cash payments for interest	$	4,404		$	4,277
Cash payments for taxes, net of tax refunds received	$	582		$	243

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2019

(in thousands, except shares)


Portfolio Company (a)(b)			Rate (d)		Principal				Fair		Percent of
Investment Type (c)	Industry		Cash/PIK	Maturity	Amount		Cost		Value (e)		Net Assets
Control Investments (t)
FDS Avionics Corp. (dba Flight Display Systems)		Aerospace & Defense Manufacturing
Second Lien Debt			4.00%/11.00%	4/1/2020	$	6,373	$	6,369	$	4,877
Revolving Loan ($50 commitment)			4.00%/11.00%	4/1/2020		221		221		221
Common Equity (7,478 shares) (j)								748		—

								7,338		5,098		1	%

Total Control Investments							$	7,338	$	5,098		1	%

Affiliate Investments (l)
FAR Research Inc. (n)		Specialty Chemicals
Common Equity (1,396 units)							$	—	$	46		0	%

Fiber Materials, Inc.		Aerospace & Defense Manufacturing
Common Equity (10 units)								645		2,900		1	%

Medsurant Holdings, LLC		Healthcare Services
Second Lien Debt			13.00%/0.00%	6/30/2020		8,823		8,799		8,823
Preferred Equity (126,662 units) (h)								1,345		2,126
Warrant (505,176 units) (h)(m)								4,516		7,671

								14,660		18,620		5	%
Microbiology Research Associates, Inc.		Healthcare Services
Subordinated Debt			11.00%/1.50%	3/13/2022		8,830		8,817		8,225
Common Equity (1,625,731 units) (j)								1,939		1,944

								10,756		10,169		2	%
Mirage Trailers LLC		Utility Equipment Manufacturing
Second Lien Debt (k)(f)			13.98%/1.50%	11/25/2020		6,131		6,102		6,131
Common Equity (2,500,000 shares) (g)								2,180		3,154

								8,282		9,285		2	%
Pfanstiehl, Inc.		Healthcare Products
Subordinated Debt			10.50%/0.00%	9/29/2022		6,208		6,198		6,208
Common Equity (8,500 units) (j)								850		15,348

								7,048		21,556		5	%
Pinnergy, Ltd.		Oil & Gas Services
Second Lien Debt (k)			12.00%/0.00%	1/24/2020		4,000		3,995		4,000
Common Equity - Class A-2 (42,500 units) (k)								3,000		36,535
Common Equity - Class B (1,000 units) (k)								3,000		3,000

								9,995		43,535		11	%
Steward Holding LLC (dba Steward Advanced Materials)		Aerospace & Defense Manufacturing
Second Lien Debt			12.00%/1.50%	5/12/2021		7,581		7,568		7,581
Common Equity (1,000,000 units)								1,000		1,485

								8,568		9,066		2	%
Trantech Radiator Products, Inc.		Utility Equipment Manufacturing
Second Lien Debt (j)			13.75%/0.00%	12/31/2019		5,994		5,994		5,994
Common Equity (6,875 shares) (j)								688		351

								6,682		6,345		2	%

Total Affiliate Investments							$	66,636	$	121,522		30	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2019

(in thousands, except shares)


Portfolio Company (a)(b)			Rate (d)		Principal					Fair		Percent of
Investment Type (c)	Industry		Cash/PIK	Maturity	Amount		Cost			Value (e)		Net Assets
Non-control/Non-affiliate Investments
Accent Food Services, LLC		Vending Equipment Manufacturing
Second Lien Debt (k)			10.00%/5.00%	5/30/2022	$	30,687	$	30,588		$	29,409
Common Equity (7,885 units) (h)(j)								800			400

								31,388			29,809		7	%
Allied 100 Group, Inc.		Healthcare Products
Common Equity (1,250,000 units) (j)								1,250			1,520		0	%
Alzheimer’s Research and Treatment Center		Healthcare Services
First Lien Debt (j)(x)			8.58%/0.00%	10/23/2023		6,500		6,454			6,454
Common Equity (1,000 units) (h)(j)								1,000			1,000

								7,454			7,454		2	%
American AllWaste LLC (dba WasteWater Transport Services)		Environmental Industries
Second Lien Debt (j)			11.00%/1.50%	11/30/2023		12,041		11,983			12,041
Delayed Draw Commitment ($2,104 commitment) (i)(j)			11.00%/1.50%	11/30/2019		—		(5	)		—
Preferred Equity (500 units) (j)								500			618

								12,478			12,659		3	%
Argo Turboserve Corporation		Business Services
Second Lien Debt (j)(y)			12.56%/0.00%	6/28/2023		15,000		14,929			14,929		4	%
AVC Investors, LLC (dba Auveco)		Specialty Distribution
Second Lien Debt (k)			11.50%/0.00%	7/3/2023		22,500		22,411			22,500
Common Equity (5,000 units) (j)								500			605

								22,911			23,105		6	%
B&B Roadway and Security Solutions, LLC		Component Manufacturing
Second Lien Debt			10.50%/1.50%	8/27/2023		10,167		10,122			9,188
Common Equity (50,000 units) ($133 commitment) (h)(j)								500			275

								10,622			9,463		2	%
BCC Group Holdings, Inc.		Information Technology Services
Subordinated Debt			11.00%/1.00%	4/11/2023		18,032		17,859			17,859
Common Equity (451 Shares)								1			1
Preferred Equity (37 Shares)								374			374

								18,234			18,234		5	%
BCM One Group Holdings, Inc.		Information Technology Services
Subordinated Debt (k)			11.00%/0.00%	7/3/2024		27,000		26,870			26,870
Common Equity (2,286 shares)								2			2
Preferred Equity (133 shares)								1,330			1,330

								28,202			28,202		7	%
Bedford Precision Parts LLC		Specialty Distribution
First Lien Debt (j)(s)			8.85%/0.00%	3/12/2024		5,000		4,963			4,963
Common Equity (500,000 units) (h)(j)								500			500

								5,463			5,463		1	%
Cardboard Box LLC (dba Anthony’s Coal Fired Pizza)		Restaurants
Common Equity (521,021 units) (j)								521			166		0	%
ControlScan, Inc.		Information Technology Services
Subordinated Debt (j)			11.00%/0.00%	1/28/2023		6,750		6,727			6,750
Common Equity (3,704 shares) (j)								4			638
Preferred Equity (100 shares) (j)								996			996

								7,727			8,384		2	%
CRS Solutions Holdings, LLC (dba CRS Texas)		Business Services
Second Lien Debt			10.50%/1.00%	9/14/2023		9,096		9,060			9,096
Common Equity (750,000 units) (j)								750			838

								9,810			9,934		2	%
Diversified Search LLC		Business Services
First Lien Debt (r)			8.74%/0.00%	2/7/2024		10,000		9,871			9,871
Common Equity (500 units) (h)(j)								500			500

								10,371			10,371		3	%
EBL, LLC (EbLens)		Retail
Second Lien Debt (j)			12.00%/1.00%	1/13/2023		9,412		9,349			9,412
Common Equity (75,000 units) (j)								750			675

								10,099			10,087		2	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2019

(in thousands, except shares)


Portfolio Company (a)(b)		Rate (d)		Principal					Fair		Percent of
Investment Type (c)	Industry	Cash/PIK	Maturity	Amount		Cost			Value (e)		Net Assets
Global Plasma Solutions, Inc.	Component Manufacturing
First Lien Debt (j)(v)		7.80%/0.00%	9/21/2023	$	8,178	$	8,108		$	8,178
Preferred Equity (947 shares) (j)							360			375
Common Equity (947 shares) (j)							15			61

							8,483			8,614		2	%
Gurobi Optimization, LLC	Information Technology Services
Common Equity (5 shares)							1,500			2,473		1	%
Hilco Plastics Holdings, LLC (dba Hilco Technologies)	Component Manufacturing
Second Lien Debt		11.50%/1.50%	12/31/2019		9,983		9,970			9,573
Preferred Equity (1,000,000 units) (h)(j)							1,000			1,152
Common Equity (72,507 units) (h)(j)							473			204

							11,443			10,929		3	%
Hub Acquisition Sub, LLC (dba Hub Pen)	Promotional products
Second Lien Debt (k)		12.25%/0.00%	9/23/2021		25,000		24,925			25,000
Common Equity (7,500 units)							249			1,413

							25,174			26,413		7	%
Hunter Defense Technologies, Inc.	Aerospace & Defense Manufacturing
First Lien Debt (j)(w)		9.60%/0.00%	3/29/2023		9,747		9,658			9,747		2	%
IBH Holdings, LLC (fka Inflexxion, Inc.)	Business Services
Common Equity (150,000 units)							—			—		0	%
inthinc Technology Solutions, Inc. (n)	Information Technology Services
Royalty Rights			4/24/2020				185			—		0	%
K2 Merger Agreement Agent, LLC (fka K2 Industrial Services, Inc.) (n)	Industrial Cleaning & Coatings
Second Lien Debt		0.00%/10.00%	1/28/2021		2,502		2,502			2,502		1	%
The Kyjen Company, LLC (dba Outward Hound)	Consumer Products
Second Lien Debt (k)		12.00%/0.00%	6/8/2024		15,000		14,939			13,792
Common Equity (765 shares) (j)							765			752

							15,704			14,544		4	%
LNG Indy, LLC (dba Kinetrex Energy)	Oil & Gas Distribution
Second Lien Debt (k)		11.50%/0.00%	11/12/2021		5,000		4,987			5,000
Common Equity (1,000 units)							1,000			1,679

							5,987			6,679		2	%
Marco Group International OpCo, LLC	Industrial Cleaning & Coatings
Second Lien Debt		10.50%/0.75%	1/21/2023		12,156		12,114			12,090
Common Equity (750,000 units) (h)(j)							750			765

							12,864			12,855		3	%
Mesa Line Services, LLC	Utilities: Services
Second Lien Debt (j)		10.50%/1.00%	8/1/2024		17,046		16,944			17,046
Delayed Draw Commitment ($2,160 commitment) (i)(j)		10.50%/1.00%	12/31/2019		—		(10	)		—
Common Equity (833 shares) (j)							1,000			1,553

							17,934			18,599		5	%
Midwest Transit Equipment, Inc.	Transportation services
Warrant (14,384 shares) (j)(m)							361			156
Warrant (9.59% of Junior Subordinated Notes) (j)(q)							381			443

							742			599		0	%
New Era Technology, Inc.	Information Technology Services
Common Equity (197,369 shares) (j)							750			1,317
Preferred Equity (632 shares) (j)							77			155

							827			1,472		0	%
NGT Acquisition Holdings, LLC (dba Techniks Industries)	Component Manufacturing
Subordinated Debt		12.50%/2.00%	3/21/2022		5,304		5,270			5,304
Common Equity (378 units) (j)							500			144

							5,770			5,448		1	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2019

(in thousands, except shares)


Portfolio Company (a)(b)			Rate (d)				Principal				Fair		Percent of
Investment Type (c)	Industry		Cash/PIK		Maturity		Amount		Cost		Value (e)		Net Assets
Oaktree Medical Centre, P.C. (dba Pain Management Associates)		Healthcare Services
First Lien Debt (j)(u)				14.50%/0.00%		1/1/2018	$	571	$	649	$	550
First Lien Debt (j)(aa)				10.00%/12.00%		1/1/2018		7,751		8,338		6,437
Subordinated Debt (j)				7.00%/0.00%		1/1/2020		88		88		—
Revolving Loan (j)(u)				14.50%/0.00%		1/1/2018		2,500		2,699		2,481
Revolving Loan (j)(u)				14.50%/0.00%		1/31/2019		200		200		184
Revolving Loan ($500 commitment) (j)				14.50%/0.00%		4/15/2019		1,250		1,250		1,149

										13,224		10,801		3	%
OMC Investors, LLC (dba Ohio Medical Corporation)		Healthcare Products
Second Lien Debt				12.00%/0.00%		7/15/2021		10,000		9,958		9,094
Common Equity (5,000 units)										500		205

										10,458		9,299		2	%
Palisade Company, LLC		Information Technology Services
Subordinated Debt (j)				11.75%/0.00%		5/15/2024		6,500		6,470		6,470
Common Equity (100 shares) (j)										1,000		1,000

										7,470		7,470		2	%
Palmetto Moon, LLC		Retail
First Lien Debt				11.50%/2.50%		10/31/2021		5,497		5,477		5,497
Common Equity (499 units) (j)										494		48

										5,971		5,545		1	%
Power Grid Components, Inc.		Specialty Distribution
Second Lien Debt (k)				11.00%/1.00%		5/20/2023		11,311		11,265		11,311
Preferred Equity (392 shares) (j)										392		433
Common Equity (9,695 shares) (j)										358		253

										12,015		11,997		3	%
Pugh Lubricants, LLC		Specialty Distribution
Second Lien Debt (k)				12.25%/0.00%		5/10/2022		23,581		23,503		23,581
Common Equity (6,125 units) (h)(j)										612		1,162

										24,115		24,743		6	%
Revenue Management Solutions, LLC		Information Technology Services
Common Equity (2,250,000 shares)										2,250		4,212		1	%

Rhino Assembly Company, LLC		Specialty Distribution
Second Lien Debt (k)				12.00%/1.00%		2/11/2023		11,353		11,306		11,353
Delayed Draw Commitment ($875 commitment) (i)(j)				12.00%/1.00%		5/17/2022		—		—		—
Preferred Equity (8,864 units) (h)(j)										945		1,180

										12,251		12,533		3	%
Road Safety Services, Inc.		Business Services
Second Lien Debt				11.25%/1.50%		3/18/2024		10,106		10,062		10,106
Common Equity (655 units)										620		744

										10,682		10,850		3	%
Rohrer Corporation		Packaging
Subordinated Debt (j)				10.50%/1.00%		4/1/2024		13,769		13,707		13,646
Common Equity (400 shares)										779		676

										14,486		14,322		4	%
SES Investors, LLC (dba SES Foam)		Building Products Manufacturing
Second Lien Debt				15.00%/0.00%		12/29/2020		3,095		3,072		2,743
Common Equity (6,000 units) (h)(j)										600		367

										3,672		3,110		1	%
Simplex Manufacturing Co.		Aerospace & Defense Manufacturing
Subordinated Debt				14.00%/0.00%		7/31/2019		4,050		4,050		4,050
Warrant (29 shares) (m)										1,155		2,776

										5,205		6,826		2	%
Software Technology, LLC		Information Technology Services
Subordinated Debt (k)				11.00%/0.00%		6/23/2023		10,000		9,966		10,000
Common Equity (12 shares)										1,291		1,433

										11,257		11,433		3	%
SpendMend LLC		Business Services
Second Lien Debt (k)				11.00%/1.00%		7/8/2023		10,427		10,384		10,427
Common Equity (1,000,000 units)										1,000		1,341

										11,384		11,768		3	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2019

(in thousands, except shares)


Portfolio Company (a)(b)		Rate (d)		Principal					Fair		Percent of
Investment Type (c)	Industry	Cash/PIK	Maturity	Amount		Cost			Value (e)		Net Assets
Thermoforming Technology Group LLC (dba Brown Machine Group) (n)	Capital Equipment Manufacturing
Common Equity (3,760 units) (h)(j)						$	—		$	10		0	%
TransGo, LLC	Component Manufacturing
Second Lien Debt		13.25%/0.00%	8/28/2022		9,500		9,471			9,500
Common Equity (1,000 units)							998			944

							10,469			10,444		2	%
The Tranzonic Companies	Specialty Distribution
Subordinated Debt (j)		10.00%/1.50%	3/27/2025		6,844		6,784			6,770
Preferred Equity (5,653 units) (j)							565			539
Common Equity (1 units) (j)							—			—

							7,349			7,309		2	%
UBEO, LLC	Business Services
Subordinated Debt (j)		11.00%/0.00%	10/3/2024		13,100		12,984			13,100
Delayed Draw Commitment ($1,500 commitment) (j)(i)(z)		11.00%/0.00%	8/7/2019		—		(7	)		—
Common Equity (705,000 units) (j)							705			990

							13,682			14,090		3	%
United Biologics, LLC	Healthcare Services
Preferred Equity (98,377 units) (h)(j)							1,008			48
Warrant (57,469 units) (m)							566			40

							1,574			88		0	%
US GreenFiber, LLC	Building Products Manufacturing
Second Lien Debt (k)(p)		12.00%/2.00%	7/15/2019		14,363		14,359			5,191
Second Lien Debt (p)		0.00%/16.00%	7/15/2019		1,000		1,000			1,000
Common Equity (2,522 units) (h)(j)							586			—

							15,945			6,191		2	%
US Pack Logistics LLC	Transportation services
Second Lien Debt (k)		12.00%/1.75%	3/28/2023		7,444		7,430			7,169
Common Equity (5,833 units) (h)(j)							555			—
Preferred Equity (9,458 units) (h)(j)							927			761

							8,912			7,930		2	%
Vanguard Dealer Services, L.L.C.	Business Services
Common Equity (6,000 units)							154			1,014
Common Equity (2,380 units) (j)							327			402

							481			1,416		0	%
Virginia Tile Company, LLC	Specialty Distribution
Second Lien Debt (k)		12.25%/0.00%	4/7/2022		12,000		11,982			12,000
Common Equity (17 units)							342			1,165

							12,324			13,165		3	%
The Wolf Organization, LLC	Building Products Manufacturing
Common Equity (175 shares)							664			3,818		1	%

Worldwide Express Operations, LLC	Transportation services
Second Lien Debt (j)(o)		10.86%/0.00%	2/3/2025		20,000		19,702			20,000
Common Equity (4,000 units) (h)(j)							2,956			3,837

							22,658			23,837		6	%

Total Non-control/Non-affiliate Investments						$	548,730		$	543,861		135	%

Total Investments						$	622,704		$	670,481		166	%

(a)	See Note 3 to the consolidated financial statements for portfolio composition by geographic location.

(b)	Equity ownership may be held in shares or units of companies related to the portfolio companies.

(c)	All debt investments are income producing, unless otherwise indicated. Equity investments are non-income producing unless otherwise noted.

(d)	Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of March 31, 2019. Generally, payment-in-kind interest can be paid-in-kind or all in cash.

(e)

The Company’s investment portfolio is comprised entirely of debt and equity securities of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the board of directors, using significant unobservable Level 3 inputs.

(f)

The investment bears cash interest at a variable rate that is determined by reference to one-month LIBOR, which is reset monthly. The cash interest rate is set as one-month LIBOR + 11.50% and is subject to a 1.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of March 31, 2019.

(g)	Income producing. Maturity date, if any, represents mandatory redemption date.

(h)	Investment is held by a wholly-owned subsidiary of the Company, other than the Funds.

(i)	The disclosed commitment represents the unfunded amount as of March 31, 2019. The Company is earning 0.50% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate which will be earned if the commitment is funded.

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2019

(in thousands, except shares)

(j)	Investment pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements).

(k)

The portion of the investment not held by the Funds is pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements).

(l)

As defined in the 1940 Act, the Company is deemed to be an “Affiliated Person” of this portfolio company because it owns 5% or more of the portfolio company’s outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was an Affiliated Person are detailed in Note 3 to the consolidated financial statements.

(m)	Warrants entitle the Company to purchase a predetermined number of shares or units of common equity, and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

(n)	Investment in portfolio company that has sold its operations and is in the process of winding down.

(o)

The investment bears interest at a variable rate that is determined by reference to six-month LIBOR, which is reset semi-annually. The interest rate is set as six-month LIBOR + 8.00% and is subject to a 1.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of March 31, 2019.

(p)	Investment was on non-accrual status as of March 31, 2019, meaning the Company has ceased recognizing interest income on the investment.

(q)	Warrant entitles the Company to purchase 9.59% of the outstanding principal of Junior Subordinated Notes prior to exercise, and is non-income producing.

(r)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 6.00% and is subject to a 1.75% LIBOR interest rate floor. In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.81% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(s)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 6.25% and is subject to a 2.00% LIBOR interest rate floor. In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.06% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(t)

As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” of and “Control” this portfolio company because it owns 25% or more of the portfolio company’s outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control are detailed in Note 3 to the consolidated financial statements.

(u)	The debt investment continues to pay interest, including the default rate, while the portfolio company pursues refinancing options.

(v)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 5.00% and is subject to a 2.00% LIBOR interest rate floor. In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.49% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(w)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR, which is reset quarterly. The interest rate is set as three-month LIBOR + 7.00% and is subject to a 1.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of March 31, 2019.

(x)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 5.75% and is subject to a 2.00% LIBOR interest rate floor. In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.15% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(y)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR, which is reset quarterly. The interest rate is set as three-month LIBOR + 9.75% and is subject to a 2.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of March 31, 2019.

(z)	The maturity date presented represents the final termination date of the commitment. $707 of the commitment expires on May 7, 2019.

(aa)	Investment was on PIK-only non-accrual status as of March 31, 2019, meaning the Company has ceased recognizing PIK interest income on the investment.

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry	Rate (d) Cash/PIK	Maturity		Principal Amount		Cost		Fair Value (e)		Percent of Net Assets
Control Investments (t)
FDS Avionics Corp. (dba Flight Display Systems)	Aerospace & Defense Manufacturing
Second Lien Debt		4.00%/11.00%		4/1/2020	$	6,203	$	6,196	$	5,397
Revolving Loan ($50 commitment)		4.00%/11.00%		4/1/2020		215		215		215
Common Equity (7,478 shares) (j)								748		—

								7,159		5,612		2%
K2 Industrial Services, Inc.	Industrial Cleaning & Coatings
Second Lien Debt (p)		0.00%/15.00%		6/25/2020		10,453		10,423		10,453
Second Lien Debt (p)		0.00%/12.00%		6/25/2020		2,261		2,255		1,155
Second Lien Debt (p)		0.00%/19.00%		6/25/2020		1,600		1,592		1,600
Common Equity (1,673 shares)								1,268		—

								15,538		13,208		3%

Total Control Investments							$	22,697	$	18,820		5%

Affiliate Investments (l)
FAR Research Inc. (n)	Specialty Chemicals
Common Equity (1,396 units)							$	—	$	116		0%
Fiber Materials, Inc.	Aerospace & Defense Manufacturing
Second Lien Debt		12.00%/0.00%		5/30/2022	$	4,044		4,032		4,044
Common Equity (10 units)								1,000		2,104

								5,032		6,148		2%
Medsurant Holdings, LLC	Healthcare Services
Second Lien Debt		13.00%/0.00%		6/30/2020		8,823		8,795		8,823
Preferred Equity (126,662 units) (h)								1,346		2,703
Warrant (505,176 units) (h)(m)								4,516		9,820

								14,657		21,346		5%
Microbiology Research Associates, Inc.	Healthcare Services
Subordinated Debt		11.00%/1.50%		3/13/2022		8,798		8,783		8,122
Common Equity (1,625,731 units) (j)								1,938		1,924

								10,721		10,046		3%
Mirage Trailers LLC	Utility Equipment Manufacturing
Second Lien Debt (k)(f)		13.85%/1.50%		11/25/2020		6,109		6,075		6,109
Common Equity (2,500,000 shares) (g)								2,179		3,174

								8,254		9,283		2%
Pfanstiehl, Inc.	Healthcare Products
Subordinated Debt		10.50%/0.00%		9/29/2022		6,208		6,197		6,208
Common Equity (8,500 units) (j)								850		13,815

								7,047		20,023		5%
Pinnergy, Ltd.	Oil & Gas Services
Second Lien Debt (k)		12.00%/0.00%		1/24/2020		4,000		3,993		4,000
Common Equity - Class A-2 (42,500 units) (k)								3,000		33,878
Common Equity - Class B (1,000 units) (k)								3,000		3,000

								9,993		40,878		10%
Steward Holding LLC (dba Steward Advanced Materials)	Aerospace & Defense Manufacturing
Second Lien Debt		12.00%/1.50%		5/12/2021		7,553		7,538		7,553
Common Equity (1,000,000 units)								1,000		1,357

								8,538		8,910		2%
Trantech Radiator Products, Inc.	Utility Equipment Manufacturing
Second Lien Debt (j)		13.75%/0.00%		12/31/2019		5,994		5,994		5,994
Common Equity (6,875 shares) (j)								688		307

								6,682		6,301		2%

Total Affiliate Investments							$	70,924	$	123,051		31%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry		Rate (d) Cash/PIK		Maturity		Principal Amount		Cost			Fair Value (e)		Percent of Net Assets
Non-control/Non-affiliate Investments
Accent Food Services, LLC		Vending Equipment Manufacturing
Second Lien Debt (k)				10.00%/5.00%		5/30/2022	$	30,312	$	30,205		$	28,879
Common Equity (7,885 units) (h)(j)										800			462

										31,005			29,341		7	%
Allied 100 Group, Inc.		Healthcare Products
Common Equity (1,250,000 units) (j)										1,250			1,744		0	%
Alzheimer’s Research and Treatment Center		Healthcare Services
First Lien Debt (j)(x)				8.23%/0.00%		10/23/2023		6,500		6,451			6,451
Common Equity (1,000 units) (h)(j)										1,000			1,000

										7,451			7,451		2	%
American AllWaste LLC (dba WasteWater Transport Services)		Environmental Industries
Second Lien Debt (j)				11.00%/1.50%		11/30/2023		11,826		11,765			11,826
Delayed Draw Commitment ($2,276 commitment) (i)(j)				11.00%/1.50%		11/30/2019		—		(7	)		—
Preferred Equity (500 units) (j)										500			615

										12,258			12,441		3	%
Argo Turboserve Corporation		Business Services
Second Lien Debt (j)(y)				12.56%/0.00%		6/28/2023		15,000		14,925			14,925		4	%
AVC Investors, LLC (dba Auveco)		Specialty Distribution
Second Lien Debt (k)				11.50%/0.00%		7/3/2023		22,500		22,406			22,500
Common Equity (5,000 units) (j)										500			682

										22,906			23,182		6	%
B&B Roadway and Security Solutions, LLC		Component Manufacturing
Second Lien Debt				10.50%/1.50%		8/27/2023		10,129		10,080			9,524
Common Equity (50,000 units) ($133 commitment) (h)(j)										500			304

										10,580			9,828		2	%
Cardboard Box LLC (dba Anthony’s Coal Fired Pizza)		Restaurants
Common Equity (521,021 units) (j)										521			108		0	%
Consolidated Infrastructure Group Holdings, LP		Business Services
Common Equity (298 units)										378			49		0	%
ControlScan, Inc.		Information Technology Services
Subordinated Debt (j)				11.00%/0.00%		1/28/2023		6,750		6,725			6,750
Common Equity (3,704 shares) (j)										4			620
Preferred Equity (100 shares) (j)										996			996

										7,725			8,366		2	%
CRS Solutions Holdings, LLC (dba CRS Texas)		Business Services
Second Lien Debt				10.50%/1.00%		9/14/2023		9,073		9,035			9,073
Common Equity (750,000 units) (j)										750			757

										9,785			9,830		2	%
EBL, LLC (EbLens)		Retail
Second Lien Debt (j)				12.00%/1.00%		1/13/2023		9,389		9,321			9,389
Common Equity (75,000 units) (j)										750			742

										10,071			10,131		3	%
Global Plasma Solutions, Inc.		Component Manufacturing
First Lien Debt (j)(v)				7.40%/0.00%		9/21/2023		8,703		8,629			8,629
Preferred Equity (947 shares) (j)										360			360
Common Equity (947 shares) (j)										15			15

										9,004			9,004		2	%
Gurobi Optimization, LLC		Information Technology Services
Subordinated Debt (k)				11.00%/0.00%		6/19/2023		20,000		19,920			20,400
Common Equity (5 shares)										1,500			2,323

										21,420			22,723		6	%
Hilco Plastics Holdings, LLC (dba Hilco Technologies)		Component Manufacturing
Second Lien Debt				11.50%/1.50%		12/31/2019		9,940		9,922			9,439
Preferred Equity (1,000,000 units) (h)(j)										1,000			1,112
Common Equity (72,507 units) (h)(j)										473			227

										11,395			10,778		3	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry		Rate (d) Cash/PIK		Maturity	Principal Amount		Cost			Fair Value (e)		Percent of Net Assets
Hub Acquisition Sub, LLC (dba Hub Pen)		Promotional products
Second Lien Debt (k)				12.25%/0.00%	9/23/2021	$	25,000	$	24,918		$	25,000
Common Equity (7,500 units)									249			1,417

									25,167			26,417		7	%
Hunter Defense Technologies, Inc.		Aerospace & Defense Manufacturing
First Lien Debt (j)(w)				9.80%/0.00%	3/29/2023		9,747		9,653			9,653		2	%
IBH Holdings, LLC (fka Inflexxion, Inc.)		Business Services
Common Equity (150,000 units)									—			—		0	%
inthinc Technology Solutions, Inc. (n)		Information Technology Services
Royalty Rights					4/24/2020				185			—		0	%
The Kyjen Company, LLC (dba Outward Hound)		Consumer Products
Second Lien Debt (k)				12.00%/0.00%	6/8/2024		15,000		14,937			13,950
Common Equity (765 shares) (j)									765			754

									15,702			14,704		4	%
LNG Indy, LLC (dba Kinetrex Energy)		Oil & Gas Distribution
Second Lien Debt (k)				11.50%/0.00%	9/28/2021		5,000		4,985			5,000
Common Equity (1,000 units)									1,000			1,561

									5,985			6,561		2	%
Marco Group International OpCo, LLC		Industrial Cleaning & Coatings
Second Lien Debt				10.50%/0.75%	1/21/2023		12,133		12,089			12,133
Common Equity (750,000 units) (h)(j)									750			800

									12,839			12,933		3	%
Mesa Line Services, LLC		Utilities: Services
Second Lien Debt (j)				10.50%/0.50%	5/31/2023		10,014		9,963			10,014
Delayed Draw Commitment ($3,160 commitment) (i)(j)				10.50%/0.50%	5/31/2019		—		(4	)		—
Common Equity (500 shares) (j)									500			676

									10,459			10,690		3	%
Midwest Transit Equipment, Inc.		Transportation services
Warrant (14,384 shares) (j)(m)									361			436
Warrant (9.59% of Junior Subordinated Notes) (j)(q)									381			398

									742			834		0	%
New Era Technology, Inc.		Information Technology Services
Common Equity (197,369 shares) (j)									750			990		0	%
NGT Acquisition Holdings, LLC (dba Techniks Industries)		Component Manufacturing
Subordinated Debt				12.50%/2.00%	3/21/2022		11,579		11,542			10,460
Common Equity (378 units) (j)									500			72

									12,042			10,532		3	%
Oaktree Medical Centre, P.C. (dba Pain Management Associates)		Healthcare Services
First Lien Debt (j)(u)				14.50%/0.00%	1/1/2018		571		649			566
First Lien Debt (j)(u)				10.00%/12.00%	1/1/2018		7,751		8,338			8,133
Revolving Loan (j)(u)				14.50%/0.00%	1/1/2018		2,500		2,699			2,490
Revolving Loan (j)(u)				14.50%/0.00%	1/31/2019		200		200			200

									11,886			11,389		3	%
OMC Investors, LLC (dba Ohio Medical Corporation)		Healthcare Products
Second Lien Debt				12.00%/0.00%	7/15/2021		10,000		9,954			8,748
Common Equity (5,000 units)									500			139

									10,454			8,887		2	%
Palisade Company, LLC		Information Technology Services
Subordinated Debt (j)				11.75%/0.00%	5/15/2024		6,500		6,468			6,468
Common Equity (100 shares) (j)									1,000			1,000

									7,468			7,468		2	%
Palmetto Moon, LLC		Retail
First Lien Debt				11.50%/2.50%	10/31/2021		5,512		5,490			5,512
Common Equity (499 units) (j)									494			108

									5,984			5,620		1	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry		Rate (d) Cash/PIK	Maturity	Principal Amount		Cost			Fair Value (e)		Percent of Net Assets
Power Grid Components, Inc.		Specialty Distribution
Second Lien Debt (k)			11.00%/1.00%	5/20/2023	$	11,282	$	11,234		$	11,282
Preferred Equity (392 shares) (j)								392			422
Common Equity (9,695 shares) (j)								358			260

								11,984			11,964		3	%
Pugh Lubricants, LLC		Specialty Distribution
Second Lien Debt (k)			12.25%/0.00%	5/10/2022		18,581		18,523			18,581
Common Equity (6,125 units) (h)(j)								612			1,000

								19,135			19,581		5	%
Revenue Management Solutions, LLC		Information Technology Services
Common Equity (2,250,000 shares)								2,250			3,888		1	%
Rhino Assembly Company, LLC		Specialty Distribution
Second Lien Debt (k)			12.00%/1.00%	2/11/2023		11,324		11,275			11,324
Delayed Draw Commitment ($875 commitment) (i)(j)			12.00%/1.00%	5/17/2022		—		—			—
Preferred Equity (8,864 units) (j)(s)								945			1,272

								12,220			12,596		3	%
Road Safety Services, Inc.		Business Services
Second Lien Debt			11.25%/1.50%	3/18/2024		10,068		10,022			10,022
Common Equity (655 units)								621			621

								10,643			10,643		2	%
Rohrer Corporation		Packaging
Subordinated Debt (j)			10.50%/1.00%	4/1/2024		13,735		13,670			13,670
Common Equity (400 shares)								780			724

								14,450			14,394		4	%
SES Investors, LLC (dba SES Foam)		Building Products Manufacturing
Second Lien Debt			15.00%/0.00%	12/29/2020		3,095		3,069			2,703
Common Equity (6,000 units) (h)(j)								600			167

								3,669			2,870		1	%
Simplex Manufacturing Co.		Aerospace & Defense Manufacturing
Subordinated Debt			14.00%/0.00%	7/31/2019		4,050		4,050			4,050
Warrant (29 shares) (m)								1,155			3,036

								5,205			7,086		2	%
Software Technology, LLC		Information Technology Services
Subordinated Debt (k)			11.00%/0.00%	6/23/2023		10,000		9,964			10,000
Common Equity (12 shares)								1,291			1,364

								11,255			11,364		3	%
SpendMend LLC		Business Services
Second Lien Debt (k)			11.00%/1.00%	7/8/2023		10,401		10,355			10,401
Common Equity (1,000,000 units)								1,000			1,179

								11,355			11,580		3	%
The Wolf Organization, LLC		Building Products Manufacturing
Common Equity (175 shares)								753			3,711		1	%
Thermoforming Technology Group LLC (dba Brown Machine Group) (n)		Capital Equipment Manufacturing
Common Equity (3,760 units) (h)(j)								—			10		0	%
Tile Redi, LLC		Building Products Manufacturing
First Lien Debt (j)(r)			12.80%/0.00%	6/16/2022		10,194		10,122			10,156		2	%
TransGo, LLC		Component Manufacturing
Second Lien Debt			13.25%/0.00%	8/28/2022		9,500		9,468			9,500
Common Equity (1,000 units)								998			905

								10,466			10,405		3	%
The Tranzonic Companies		Specialty Distribution
Subordinated Debt (j)			10.00%/1.50%	3/27/2025		5,664		5,614			4,997
Preferred Equity (5,000 units) (j)								500			391
Common Equity (1 units) (j)								—			—

								6,114			5,388		1	%
UBEO, LLC		Business Services
Subordinated Debt (j)			11.00%/0.00%	10/3/2024		13,100		12,979			13,100
Delayed Draw Commitment ($1,500 commitment) (j)(i)(z)			11.00%/0.00%	8/7/2019		—		(12	)		—
Common Equity (705,000 units) (j)								705			1,027

								13,672			14,127		3	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry		Rate (d) Cash/PIK		Maturity		Principal Amount		Cost		Fair Value (e)		Percent of Net Assets
United Biologics, LLC		Healthcare Services
Preferred Equity (98,377 units) (h)(j)									$	1,008	$	64
Warrant (57,469 units) (m)										566		53

										1,574		117		0	%
US GreenFiber, LLC		Building Products Manufacturing
Second Lien Debt (k)(p)				12.00%/2.00%		5/31/2019	$	14,363		14,359		6,549
Second Lien Debt (p)				0.00%/16.00%		5/31/2019		1,000		1,000		1,000
Common Equity (2,522 units) (h)(j)										586		—

										15,945		7,549		2	%
US Pack Logistics LLC		Transportation services
Second Lien Debt (k)				12.00%/1.75%		3/28/2023		7,412		7,396		7,412
Common Equity (5,833 units) (h)(j)										555		178
Preferred Equity (9,458 units) (h)(j)										927		1,046

										8,878		8,636		2	%
Vanguard Dealer Services, L.L.C.		Business Services
Common Equity (6,000 units)										154		851
Common Equity (2,380 units) (j)										327		338

										481		1,189		0	%
Virginia Tile Company, LLC		Specialty Distribution
Second Lien Debt (k)				12.25%/0.00%		4/7/2022		12,000		11,980		12,000
Common Equity (17 units)										342		1,455

										12,322		13,455		3	%
Worldwide Express Operations, LLC		Transportation services
Second Lien Debt (j)(o)				10.86%/0.00%		2/3/2025		20,000		19,690		20,000
Common Equity (4,000 units) (h)(j)										2,956		3,823

										22,646		23,823		6	%

Total Non-control/Non-affiliate Investments									$	505,129	$	501,111		124	%

Total Investments									$	598,750	$	642,982		160	%

(a)	See Note 3 to the consolidated financial statements for portfolio composition by geographic location.

(b)	Equity ownership may be held in shares or units of companies related to the portfolio companies.

(c)	All debt investments are income producing, unless otherwise indicated. Equity investments are non-income producing unless otherwise noted.

(d)	Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of December 31, 2018. Generally, payment-in-kind interest can be paid-in-kind or all in cash.

(e)

(f)

(g)	Income producing. Maturity date, if any, represents mandatory redemption date.

(h)	Investment is held by a wholly-owned subsidiary of the Company, other than the Funds.

(i)	The disclosed commitment represents the unfunded amount as of December 31, 2018. The Company is earning 0.50% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate which will be earned if the commitment is funded.

(j)	Investment pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements).

(k)

(l)

(m)	Warrants entitle the Company to purchase a predetermined number of shares or units of common equity, and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

(n)	Investment in portfolio company that has sold its operations and is in the process of winding down.

(o)

(p)	Investment was on non-accrual status as of December 31, 2018, meaning the Company has ceased recognizing interest income on the investment.

(q)	Warrant entitles the Company to purchase 9.59% of the outstanding principal of Junior Subordinated Notes prior to exercise, and is non-income producing.

(r)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR, which is reset quarterly. The interest rate is set as three-month LIBOR + 10.00% and is subject to a 1.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of December 31, 2018.

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)

(s)	A portion of the investment is held by a wholly-owned subsidiary of the Company, other than the Funds.

(t)

(u)	The debt investment continues to pay interest, including the default rate, while the portfolio company pursues refinancing options.

(v)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 5.00% and is subject to a 2.00% LIBOR interest rate floor. In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.54% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(w)

(x)

(y)

(z)	The maturity date presented represents the final termination date of the commitment. $707 of the commitment expires on May 7, 2019.

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Note 1. Organization and Nature of Business

Fidus Investment Corporation (“FIC,” and together with its subsidiaries, the “Company”), a Maryland Corporation, operates as an externally managed, closed-end, non-diversified business development company (“BDC”) under the Investment Company Act of 1940, as amended (“1940 Act”). FIC completed its initial public offering, or IPO, in June 2011. In addition, for federal income tax purposes, the Company elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

The Company provides customized debt and equity financing solutions to lower middle-market companies, and may make investments directly or through its three wholly-owned investment company subsidiaries, Fidus Mezzanine Capital, L.P. (“Fund I”), Fidus Mezzanine Capital II, L.P. (“Fund II”) and Fidus Mezzanine Capital III, L.P. (“Fund III”) (collectively Fund I, Fund II and Fund III are referred to as the “Funds”). The Funds are licensed by the U.S. Small Business Administration (the “SBA”) as small business investment companies (“SBIC”). The SBIC licenses allow the Funds to obtain leverage by issuing SBA-guaranteed debentures (“SBA debentures”), subject to the issuance of leverage commitments by the SBA and other customary procedures. As SBICs, the Funds are subject to a variety of regulations and oversight by the SBA under the Small Business Investment Act of 1958, as amended (the “SBIC Act”), concerning, among other things, the size and nature of the companies in which they may invest and the structure of those investments.

We believe that utilizing both FIC and the Funds as investment vehicles provides us with access to a broader array of investment opportunities. Given our access to lower cost capital through the SBA’s SBIC debenture program, we expect that the majority of our investments will continue to be made through the Funds until the Funds reach their borrowing limit under the program. For three or more SBICs under common control, the maximum amount of outstanding SBA debentures cannot exceed $350,000.

Fund I has also elected to be regulated as a BDC under the 1940 Act. Fund II and Fund III are not registered under the 1940 Act and rely on the exclusion from the definition of investment company contained in Section 3(c)(7) of the 1940 Act.

The Company pays a quarterly base management fee and an incentive fee to Fidus Investment Advisors, LLC (the “Investment Advisor”) under an investment advisory agreement (the “Investment Advisory Agreement”).

Note 2. Significant Accounting Policies

Basis of presentation: The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) pursuant to the requirements for reporting on Form 10-Q, Accounting Standards Codification (“ASC”) 946, Financial Services – Investment Companies (“ASC 946), and Articles 6 or 10 of Regulation S-X. In the opinion of management, the consolidated financial statements reflect all adjustments and reclassifications that are necessary for the fair presentation of financial results as of and for the periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation. The current period’s results of operation are not necessarily indicative of results that ultimately may be achieved for the year. Therefore, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2018.

Use of estimates: The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Consolidation: Pursuant to Article 6 of Regulation S-X and ASC 946, the Company will generally not consolidate its investments in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. As a result, the consolidated financial statements of the Company include only the accounts of the Company and its wholly-owned subsidiaries, including the Funds. All significant intercompany balances and transactions have been eliminated.

Investment risks: The Company’s investments are subject to a variety of risks. These risks may include, but are not limited to the following:

•

Market risk - In contrast to investment-grade bonds (the market prices of which change primarily as a reaction to changes in interest rates), the market prices of high-yield bonds (which are also affected by changes in interest rates) are influenced much more by credit factors and financial results of the issuer as well as general economic factors that influence the financial markets as a whole. The portfolio companies in which the Company invests may be unseasoned, unprofitable and/or have little established operating history or earnings. These companies may also lack technical, marketing, financial, and other resources or may be dependent upon the success of one product or service, a unique distribution channel, or the effectiveness of a manager or management team, as compared to larger, more established

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

entities. The failure of a single product, service or distribution channel, or the loss or the ineffectiveness of a key executive or executives within the management team may have a materially adverse impact on such companies. Furthermore, these companies may be more vulnerable to competition and to overall economic conditions than larger, more established entities.

•

Credit risk - Credit risk represents the risk that the Company would incur if the counterparties failed to perform pursuant to the terms of their agreements with the Company. Issues of high-yield debt securities in which the Company invests are more likely to default on interest or principal than are issues of investment-grade securities.

•

Liquidity risk - Liquidity risk represents the possibility that the Company may not be able to sell its investments quickly or at a reasonable price (given the lack of an established market).

•

Interest rate risk - Interest rate risk represents the likelihood that a change in interest rates could have an adverse impact on the fair value of an interest-bearing financial instrument.

•

Prepayment risk - Certain of the Company’s debt investments allow for prepayment of principal without penalty. Downward changes in market interest rates may cause prepayments to occur at a faster than expected rate, thereby effectively shortening the maturity of the debt investments and making the instrument less likely to be an income producing instrument through the stated maturity date.

•

Off-Balance sheet risk - Some of the Company’s financial instruments contain off-balance sheet risk. Generally, these financial instruments represent future commitments to purchase other financial instruments at defined terms at defined future dates. See Note 7 for further details.

Fair value of financial instruments: The Company measures and discloses fair value with respect to substantially all of its financial instruments in accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework used to measure fair value, and requires disclosures for fair value measurements, including the categorization of financial instruments into a three-level hierarchy based on the transparency of valuation inputs. See Note 4 to the consolidated financial statements for further discussion regarding the fair value measurements and hierarchy.

Investment classification: The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in those companies where the Company owns more than 25% of the voting securities of such company or has rights to maintain greater than 50% of the board representation. Under the 1940 Act, “Affiliate Investments” are defined as investments in those companies where the Company owns between 5% and 25% of the voting securities of such company. “Non-Control/Non-Affiliate Investments” are those that neither qualify as Control Investments nor Affiliate Investments.

Segments: In accordance with ASC Topic 280 — Segment Reporting, the Company has determined that it has a single reporting segment and operating unit structure.

Cash and cash equivalents: Cash and cash equivalents are highly liquid investments with an original maturity of three months or less at the date of acquisition. The Company places its cash in financial institutions and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limits. The Company does not believe its cash balances are exposed to any significant credit risk.

Deferred financing costs: Deferred financing costs consist of fees and expenses paid in connection with the Credit Facility (as defined in Note 6) and SBA debentures. Deferred financing costs are capitalized and amortized to interest and financing expenses over the term of the debt agreement using the effective interest method. Unamortized deferred financing costs are presented as an offset to the corresponding debt liabilities on the consolidated statements of assets and liabilities.

Realized losses on extinguishment of debt: Upon the repayment of debt obligations which are deemed to be extinguishments, the difference between the principal amount due at maturity adjusted for any unamortized deferred financing costs is recognized as a loss (i.e., the unamortized deferred financing costs are recognized as a loss upon extinguishment of the underlying debt obligation). In 2019, the Company elected to change the manner in which it presents the derecognition of unamortized deferred financing costs upon extinguishment of the related debt obligation. Previously, the Company classified the extinguishment as a component of interest and financing expenses on the consolidated statements of operations. Comparative prior periods presented have been reclassified retrospectively to conform to the revised presentation. There is no change in historical net increase in net assets resulting from operations due to this change in presentation.

Deferred offering costs: Deferred offering costs include registration expenses related to shelf filings. These expenses primarily consist of U.S. Securities and Exchange Commission (“SEC”) registration fees, legal fees and accounting fees incurred. These expenses are included in prepaid expenses and other assets on the Consolidated Statements of Assets and Liabilities. Upon the completion of an equity offering or a debt offering, the deferred expenses are charged to additional paid-in capital or deferred financing costs, respectively. If no offering is completed prior to the expiration of the registration statement, the deferred costs are charged to expense.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Realized gains or losses and unrealized appreciation or depreciation on investments: Realized gains or losses on investments are recorded upon the sale or disposition of a portfolio investment and are calculated as the difference between the net proceeds from the sale or disposition and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation on the consolidated statements of operations includes changes in the fair value of investments from the prior period, as determined in good faith by the Company’s board of directors (the “Board”) through the application of the Company’s valuation policy, as well as reclassifications of any prior period unrealized appreciation or depreciation on exited investments to realized gains or losses on investments.

Interest and dividend income: Interest and dividend income is recorded on the accrual basis to the extent that the Company expects to collect such amounts. Interest is accrued daily based on the outstanding principal amount and the contractual terms of the debt. Dividend income is recorded as dividends are declared or at the point an obligation exists for the portfolio company to make a distribution, and is generally recognized when received. Distributions from portfolio companies are evaluated to determine if the distribution is a distribution of earnings or a return of capital. Distributions of earnings are included in dividend income while a return of capital is recorded as a reduction in the cost basis of the investment. Estimates are adjusted as necessary after the relevant tax forms are received from the portfolio company.

PIK income: Certain of the Company’s investments contain a payment-in-kind (“PIK”) income provision. The PIK income, computed at the contractual rate specified in the applicable investment agreement, is added to the principal balance of the investment, rather than being paid in cash, and recorded as interest or dividend income, as applicable, on the consolidated statements of operations. Generally, PIK can be paid-in-kind or all in cash. The Company stops accruing PIK income when there is reasonable doubt that PIK income will be collected. PIK income that has been contractually capitalized to the principal balance of the investment prior to the non-accrual designation date is not reserved against interest or dividend income, but rather is assessed through the valuation of the investment (with corresponding adjustments to unrealized depreciation, as applicable). PIK income is included in the Company’s taxable income and, therefore, affects the amount the Company is required to pay to shareholders in the form of dividends in order to maintain the Company’s tax treatment as a RIC and to avoid corporate federal income tax, even though the Company has not yet collected the cash.

Non-accrual: Debt investments or preferred equity investments (for which we are accruing PIK dividends) are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected. Interest and dividend payments received on non-accrual investments may be recognized as interest or dividend income or may be applied to the investment principal balance based on management’s judgment. Non-accrual investments are restored to accrual status when past due principal, interest or dividends are paid and, in management’s judgment, payments are likely to remain current.

Origination and closing fees: The Company also typically receives debt investment origination or closing fees in connection with such investments. Such debt investment origination and closing fees are capitalized as unearned income and offset against investment cost basis on the consolidated statements of assets and liabilities and accreted into interest income over the life of the investment. Upon the prepayment of a debt investment, any unaccreted debt investment origination and closing fees are accelerated into interest income.

Warrants: In connection with the Company’s debt investments, the Company will sometimes receive warrants or other equity-related securities from the borrower (“Warrants”). The Company determines the cost basis of Warrants based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and Warrants received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the Warrants is treated as original issue discount (“OID”), and accreted into interest income using the effective interest method over the term of the debt investment. Upon the prepayment of a debt investment, any unaccreted OID is accelerated into interest income.

Fee income: Transaction fees earned in connection with the Company’s investments are recognized as fee income and are generally non-recurring. Such fees typically include fees for services, including structuring and advisory services, provided to portfolio companies. The Company recognizes income from fees for providing such structuring and advisory services when the services are rendered or the transactions are completed. Upon the prepayment of a debt investment, any prepayment penalties are recorded as fee income when earned.

Partial loan sales: The Company follows the guidance in ASC 860, Transfers and Servicing, when accounting for loan (debt investment) participations and other partial loan sales. Such guidance requires a participation or other partial loan sale to meet the definition of a “participating interest,” as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest should remain on the Company’s consolidated statement of assets and liabilities and the proceeds recorded as a secured borrowing until the definition is met. Management has determined that all participations and other partial loan sale transactions entered into by the Company have met the definition of a participating interest. Accordingly, the Company uses sale treatment in accounting for such transactions.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Income taxes: The Company has elected to be treated as a RIC under Subchapter M of the Code, which will generally relieve the Company from U.S. federal income taxes with respect to all income distributed to stockholders. To maintain the tax treatment of a RIC, the Company is required to timely distribute to its stockholders at least 90.0% of “investment company taxable income,” as defined by Subchapter M of the Code, each year. Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year; however, the Company will pay a 4.0% excise tax if it does not distribute at least 98.0% of the current year’s ordinary taxable income. Any such carryover taxable income must be distributed through a dividend declared prior to the later of the date on which the final tax return related to the year in which the Company generated such taxable income is filed or the 15^th day of the 10^th month following the close of such taxable year. In addition, the Company will be subject to federal excise tax if it does not distribute at least 98.2% of its net capital gains realized, computed for any one year period ending October 31.

In the future, the Funds may be limited by provisions of the SBIC Act and SBA regulations governing SBICs from making certain distributions to FIC that may be necessary to enable FIC to make the minimum distributions required to maintain the tax treatment of a RIC.

The Company has certain wholly-owned taxable subsidiaries (the “Taxable Subsidiaries”), each of which generally holds one or more of the Company’s portfolio investments listed on the consolidated schedules of investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that the Company’s consolidated financial statements reflect the Company’s investment in the portfolio company investments owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit the Company to hold equity investments in portfolio companies that are taxed as partnerships for U.S. federal income tax purposes (such as entities organized as limited liability companies (“LLCs”) or other forms of pass through entities) while complying with the “source-of-income” requirements contained in the RIC tax provisions. The Taxable Subsidiaries are not consolidated with the Company for U.S. federal corporate income tax purposes, and each Taxable Subsidiary will be subject to U.S. federal corporate income tax on its taxable income. Any such income or expense is reflected in the consolidated statements of operations.

U.S. federal income tax regulations differ from GAAP, and as a result, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized under GAAP. Differences may be permanent or temporary. Permanent differences may arise as a result of, among other items, a difference in the book and tax basis of certain assets and nondeductible federal income taxes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

ASC Topic 740 — Accounting for Uncertainty in Income Taxes (“ASC Topic 740”) provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the consolidated financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be respected by the applicable tax authorities. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits included in the income tax provision, if any. There were no material uncertain income tax positions at March 31, 2019 and December 31, 2018. The Company’s tax returns are generally subject to examination by U.S. federal and most state tax authorities for a period of three years from the date the respective returns are filed, and, accordingly, the Company’s 2015 through 2017 tax years remain subject to examination.

Dividends to stockholders: Dividends to stockholders are recorded on the record date with respect to such distributions. The amount, if any, to be distributed to stockholders, is determined by the Board each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, may be distributed at least annually, although the Company may decide to retain such capital gains for investment.

The determination of the tax attributes for the Company’s distributions is made annually, and is based upon the Company’s taxable income and distributions paid to its stockholders for the full year. Ordinary dividend distributions from a RIC do not qualify for the preferential tax rate on qualified dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax characterization of the Company’s distributions generally includes both ordinary income and capital gains but may also include qualified dividends or return of capital.

The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if the Company declares a cash dividend, the Company’s stockholders who have not “opted out” of the DRIP at least two days prior to the dividend payment date will have their cash dividend automatically reinvested into additional shares of the Company’s common stock. The Company has the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

of common stock by the DRIP plan administrator. Newly issued shares are valued based upon the final closing price of the Company’s common stock on a date determined by the Board. Shares purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased by the DRIP plan administrator before any associated brokerage or other costs. See Note 9 to the consolidated financial statements regarding dividend declarations and distributions.

Earnings and net asset value per share: The earnings per share calculations for the three months ended March 31, 2019 and 2018, are computed utilizing the weighted average shares outstanding for the period. Net asset value per share is calculated using the number of shares outstanding as of the end of the period.

Stock Repurchase Program: The Company has an open market stock repurchase program (the “Stock Repurchase Program”) under which the Company may acquire up to $5,000 of its outstanding common stock. Under the Stock Repurchase Program, the Company may, but is not obligated to, repurchase outstanding common stock in the open market from time to time provided that the Company complies with the prohibitions under its insider trading policies and the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market value and timing constraints. The timing, manner, price and amount of any share repurchases will be determined by the Company’s management, in its discretion, based upon the evaluation of economic and market conditions, stock price, capital availability, applicable legal and regulatory requirements and other corporate considerations. On October 30, 2018, the Board extended the Stock Repurchase Program through December 31, 2019, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not require the Company to repurchase any specific number of shares and the Company cannot assure that any shares will be repurchased under the Stock Repurchase Program. The Stock Repurchase Program may be suspended, extended, modified or discontinued at any time. The Company did not make any repurchases of common stock during the three months ended March 31, 2019. During the three months ended March 31, 2018, the Company repurchased 44,821 shares of common stock on the open market for $582. Refer to Note 8 for additional information concerning stock repurchases.

Recent accounting pronouncements:

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019. The Company is currently evaluating the impact this ASU will have on the Company’s consolidated financial position or disclosures.

In March 2019, the SEC issued Final Rule Release No. 33-10618, FAST Act Modernization and Simplification of Regulation S-K, which amends certain SEC disclosure requirements. The amendments are intended to simplify certain disclosure requirements, improve readability and navigability of disclosure documents, and discourage repetition and disclosure of immaterial information. The amendments are effective for all filings submitted on or after May 2, 2019. The Company adopted the amendments effective May 2, 2019. As it pertains to the Company for this Form 10-Q, the amendments include certain presentation changes that are not significant to the Company’s consolidated financial position or disclosures. The Company is still evaluating the impact this amendment will have on its other future periodic filings and registration statements.

Note 3. Portfolio Company Investments

The Company’s portfolio investments principally consist of secured and unsecured debt, equity warrants and direct equity investments in privately held companies. The debt investments may or may not be secured by either a first or second lien on the assets of the portfolio company. The debt investments generally bear interest at fixed rates, and generally mature between five and seven years from the original investment. In connection with a debt investment, the Company also may receive nominally priced equity warrants and/or make a direct equity investment in the portfolio company. The Company’s warrants or equity investments may be investments in a holding company related to the portfolio company. In addition, the Company periodically makes equity investments in its portfolio companies through Taxable Subsidiaries. In both situations, the investment is generally reported under the name of the operating company on the consolidated schedules of investments.

As of March 31, 2019, the Company had active investments in 61 portfolio companies and residual investments in four portfolio companies that have sold its underlying operations. The aggregate fair value of the total portfolio was $670,481 and the weighted average effective yield on the Company’s debt investments was 12.4% as of such date. As of March 31, 2019, the Company held equity investments in 93.8% of its portfolio companies and the weighted average fully diluted equity ownership in those portfolio companies was 6.4%. The weighted average fully diluted equity ownership was computed using the fully diluted equity ownership for equity investments (including warrants) at cost as of March 31, 2019.

As of December 31, 2018, the Company had active investments in 60 portfolio companies and residual investments in three portfolio companies that have sold their underlying operations. The aggregate fair value of the total portfolio was $642,982 and the weighted average effective yield on the Company’s debt investments was 12.6% as of such date. As of December 31, 2018, the Company held equity investments in 93.7% of its portfolio companies and the weighted average fully diluted equity ownership in those portfolio companies was 6.6%. The weighted average fully diluted equity ownership was computed using the fully diluted equity ownership for equity investments (including warrants) at cost as of December 31, 2018.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

The weighted average yield of the Company’s debt investments is not the same as a return on investment for its stockholders but, rather, relates to a portion of the Company’s investment portfolio and is calculated before the payment of all of the Company’s and its subsidiaries’ fees and expenses. The weighted average yields were computed using the effective interest rates for debt investments at cost as of March 31, 2019 and December 31, 2018, including accretion of OID and debt investment origination fees, but excluding investments on non-accrual status, if any.

Purchases of debt and equity investments for the three months ended March 31, 2019 and 2018 totaled $80,473 and $60,913, respectively. Proceeds from sales and repayments, including principal, return of capital distributions and realized gains, of portfolio investments for the three months ended March 31, 2019 and 2018 totaled $57,352 and $36,093, respectively.

Investments by type with corresponding percentage of total portfolio investments consisted of the following:


	Fair Value								Cost
	March 31,				December 31,				March 31,				December 31,
	2019				2018				2019				2018
Second Lien Debt	$	362,680	54.0	%	$	366,517	57.0	%	$	377,350	60.6	%	$	379,973	63.5	%
Subordinated Debt		125,252	18.7			104,225	16.2			125,783	20.2			105,900	17.7
First Lien Debt		55,511	8.3			51,790	8.1			57,667	9.3			52,231	8.7
Equity		115,952	17.3			106,707	16.6			54,740	8.8			53,482	8.9
Warrants		11,086	1.7			13,743	2.1			6,979	1.1			6,979	1.2
Royalty Rights		—	—			—	—			185	—			185	—

Total	$	670,481	100.0	%	$	642,982	100.0	%	$	622,704	100.0	%	$	598,750	100.0	%

All investments made by the Company as of March 31, 2019 and December 31, 2018 were made in portfolio companies headquartered in the U.S. The following table shows portfolio composition by geographic region at fair value and cost and as a percentage of total investments. The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s business.


	Fair Value								Cost
	March 31,				December 31,				March 31,				December 31,
	2019				2018				2019				2018
Midwest	$	149,133	22.3	%	$	161,067	25.1	%	$	134,355	21.5	%	$	152,607	25.5	%
Southeast		171,626	25.6			176,819	27.5			151,185	24.3			155,271	25.9
Northeast		148,874	22.2			89,661	13.9			142,227	22.8			84,246	14.1
West		59,719	8.9			62,824	9.8			54,505	8.8			54,469	9.1
Southwest		141,129	21.0			152,611	23.7			140,432	22.6			152,157	25.4

Total	$	670,481	100.0	%	$	642,982	100.0	%	$	622,704	100.0	%	$	598,750	100.0	%

The following table shows portfolio composition by type and by geographic region at fair value as a percentage of net assets.


By Type							By Geographic Region
	March 31,			December 31,				March 31,			December 31,
	2019			2018				2019			2018
Second Lien Debt		89.7	%		90.9	%	Midwest		36.7	%		40.0	%
Subordinated Debt		30.9			25.9		Southeast		42.4			43.9
First Lien Debt		13.7			12.9		Northeast		36.8			22.2
Equity		28.6			26.5		West		14.8			15.6
Warrants		2.7			3.4		Southwest		34.9			37.9
Royalty Rights		—			—

Total		165.6	%		159.6	%	Total		165.6	%		159.6	%

As of March 31, 2019 and December 31, 2018, the Company had no portfolio company investments that represented more than 10% of the total investment portfolio on a fair value or cost basis.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

As of March 31, 2019 and December 31, 2018, the Company had debt investments in two portfolio companies on non-accrual status, respectively:


	March 31, 2019						December 31, 2018
	Fair						Fair
Portfolio Company	Value			Cost			Value			Cost
K2 Industrial Services, Inc.	$	—	⁽¹⁾	$	—	⁽¹⁾	$	13,208		$	14,270
Oaktree Medical Centre, P.C. (dba Pain Management Associates)		6,437	⁽³⁾		8,338	⁽³⁾		—	⁽²⁾		—	⁽²⁾
US GreenFiber, LLC		6,191			15,359			7,549			15,359

Total	$	12,628		$	23,697		$	20,757		$	29,629

(1)	Portfolio company was no longer held at period end. Interest earned while on non-accrual was paid in full at exit.

(2)	Portfolio company debt investments were not on non-accrual status at period end.

(3)	Portfolio company last-out debt investment was on PIK-only on non-accrual status at period end, meaning the Company has ceased recognizing PIK interest income on the investment.

Consolidated Schedule of Investments In and Advances To Affiliates

The table below represents the fair value of control and affiliate investments as of December 31, 2018 and any additions and reductions made to such investments during the three months ended March 31, 2019, the ending fair value as of March 31, 2019, and the total investment income earned on such investments during the period.


												Three Months Ended March 31, 2019
	March 31,
	2019														Net Change in
	Principal		December 31,							March 31,		Net Realized			Unrealized					Payment-in-
	Amount - Debt		2018		Gross		Gross			2019 Fair		Gains			Appreciation			Interest		kind Interest		Dividend		Fee
Portfolio Company⁽¹⁾	Investments		Fair Value		Additions⁽²⁾ Reductions ⁽³⁾					Value		(Losses)⁽⁴⁾			(Depreciation)			Income		Income		Income		Income
Control Investments
FDS Avionics Corp. (dba Flight Display Systems)	$	6,594	$	5,612	$	179	$	(693	)	$	5,098	$	—		$	(693	)	$	65	$	177	$	—	$	—
K2 Industrial Services, Inc.		—		13,208		3,435		(16,643	)		—		(1,268	)		2,330			217		1,060		—		349

Total Control Investments	$	6,594	$	18,820	$	3,614	$	(17,336	)	$	5,098	$	(1,268	)	$	1,637		$	282	$	1,237	$	—	$	349

Affiliate Investments
FAR Research Inc.	$	—	$	116	$	—	$	(70	)	$	46	$	—		$	(70	)	$	—	$	—	$	—	$	—
Fiber Materials, Inc.		—		6,148		1,152		(4,400	)		2,900		—			1,139			56		—		—		—
Medsurant Holdings, LLC		8,823		21,346		6		(2,732	)		18,620		—			(2,732	)		291		—		—		—
Microbiology Research Associates, Inc.		8,830		10,046		124		(1	)		10,169		—			90			240		33		—		22
Mirage Trailers LLC		6,131		9,283		28		(26	)		9,285		—			(26	)		218		23		1		—
Pfanstiehl, Inc.		6,208		20,023		1,533		—			21,556		—			1,532			162		—		367		—
Pinnergy, Ltd.		4,000		40,878		2,657		—			43,535		—			2,656			122		—		—		—
Steward Holding LLC (dba Steward Advanced Materials)		7,581		8,910		156		—			9,066		—			126			225		27		—		—
Trantech Radiator Products, Inc.		5,994		6,301		44		—			6,345		—			44			206		—		—		—

Total Affiliate Investments	$	47,567	$	123,051	$	5,700	$	(7,229	)	$	121,522	$	—		$	2,759		$	1,520	$	83	$	368	$	22

(1)	The investment type, industry, ownership detail for equity investments, and if the investment is income producing is disclosed in the consolidated schedule of investments.

(2)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest and PIK dividend income, accretion of OID and origination fees, and net unrealized appreciation recognized during the period. Gross additions also include transfers of portfolio companies into the control or affiliate classification during the period, as applicable.

(3)

Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and net unrealized (depreciation) recognized during the period. Gross reductions also include transfers of portfolio companies out of the control or affiliate classification during the period, as applicable.

(4)

The schedule does not reflect realized gains or losses on escrow receivables for investments which were previously exited and were not held during the period presented. Gains and losses on escrow receivables are classified in the consolidated statements of operations according to the control classification at the time the investment was exited.

Note 4. Fair Value Measurements

Investments

The Board has established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring basis in accordance with ASC Topic 820 and consistent with the requirements of the 1940 Act. Fair value is the price, determined at the measurement date, that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available or reliable, valuation techniques described below are applied. Under ASC Topic 820, portfolio investments recorded at fair value in the consolidated financial statements are classified within the fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value, as defined below:

Level 1 — Inputs are unadjus

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